WASCE gives me dependency error!

Before I say enything, you have to know that I strongly followed "WASCE Getting Started PDF"!
So I do the follownigs:
Downloaded WASCE 3.0 installed it to winXP SP3 machine. I have also installed Eclipse indigo for Java EE developing.
Based on WASCE Getting Started PDF i have created the totally simple "Hello World" dynamic web project with Eclipse and WebSphere. I have WEP (WebSphere Eclipse Plugin) in my Eclipse. I can see and start/stop WebSphere App server from Eclipse, but when I try to run my web application I get the following error:

Note the in the exception trace: java.security.AccessController.doPrivileged
'RMIConnection' is likely trying to write the war file to the deploy directory (eg: appserver-base/repository/xx but is denied access by jre.
Now setting up the access, that is the trick - I can atest to hacking at this for hours ( windows7 / eclipse indigo / wsce-eclipse plugin / websphere comm. edition V3.0).
Some things I have tried:
1. From eclipse server view(wsceV3.0) edit the 'launch configuration' to add VM arguments, eg:
-Djava.rmi.server.codebase=file:/C:/ibm/wsce/appserverV3.0/bin/
-Djava.rmi.server.hostname=localhost
-Djava.security.policy=server.policy
-DXorg.apache.geronimo.deployment.LenientMFCP=true